Washington, U.S.A. — The Concord Coalition has said that new projections by the Congressional Budget Office (CBO) underscore the need for Washington to commit to long-term fiscal reforms while dealing with this year’s looming budget decisions. Concord said the new numbers should also provide a sobering picture for this year’s candidates for federal office one that should temper election-year impulses to offer voters unrealistic promises.

“Once again, CBO’s projections show that if politicians don’t deviate from current policies, the country will continue down an unsustainable path that threatens to weaken the country, jeopardize our standard of living and leave our children and future generations with unmanageable levels of government debt,” said Robert L. Bixby, Concord’s executive director. “These numbers should frame this year’s political debates, and candidates from both parties would do well to spend some time studying their implications.”

“We need to put the country on a better fiscal path,” he added, “and candidates must clearly explain to voters — with specifics, not empty rhetoric — how they plan to do that. It will require setting priorities and making changes throughout the federal budget, and voters deserve to hear credible plans for doing this.”

CBO’s Update to the Budget and Economic Outlook estimates that the federal deficit for this fiscal year, which ends Sept. 30, will total $1.1 trillion. While that is down slightly from CBO’s March projection, it will be the fourth consecutive deficit of more than $1 trillion. In addition, federal debt held by the public would reach 73 percent of GDP, which CBO notes is the highest level since 1950 and is “about twice the share that it measured at the end of 2007, before the financial crisis and recession.”

The CBO prepared two sets of projections. The first — the CBO’s “baseline projections” — assumes that current laws will generally remain in effect. An alternative scenario, however, looks at what could happen if Congress changes certain laws to continue many current policies. This alternative scenario presents a far more troubling long-term picture. Using the new CBO numbers, The Concord Coalition today updated its own “Plausible Baseline,” which applies what Concord considers to be realistic assumptions about future policy decisions. These projections are close to the CBO’s alternative scenario.

The budget office notes that the outlook for budget deficits, federal debt and the economy are “especially uncertain now because substantial changes to tax and spending policies are scheduled to take effect in January 2013.” These changes have often been called the “fiscal cliff” because if Congress allows all of them to take effect at once, it could cause substantial short-term economic damage, perhaps triggering a recession.

Under Concord’s Plausible Baseline, deficits between 2013 and 2022 would be much higher, averaging over 5 percent of GDP rather than 1 percent. Debt held by the public would grow to 93 percent of GDP by 2022, the highest level since shortly after World War II. As the budget office points out, that is not a sustainable level of federal debt.

“The differences between the CBO baseline and either CBO’s alternative scenario or Concord’s Plausible Baseline are striking, and they highlight the importance of the policy decisions that elected officials must confront before the end of the year,” Bixby said.

“While it is important to support the economic recovery, Washington should also be laying the groundwork for the big fiscal reforms that are necessary to put the federal budget on a more responsible track over the long term. It is possible to do both, but this will require more thoughtful policy-making and greater bipartisanship than we have seen in Washington recently.”

• Choices over tax policy, account for the bulk of the difference between the CBO baseline and the more plausible scenarios within the 10-year budget window. Extending the 2001 and 2003 tax cuts, along with fixes to the Alternative Minimum Tax (AMT) and debt service costs would add $5.2 trillion to deficits over 10 years.
• In CBO’s baseline projections, mandatory spending will increase from 13.3 percent of GDP in 2013 to 14.4 percent in 2022. Nearly all of that increase would be due to the growth of just Social Security and Medicare — representing the effect of the baby boom generation entering retirement. CBO projects that by 2022 over half of the entire federal budget will be spent on just Medicare, Medicaid, and Social Security.
• For Medicare specifically, baseline growth is not attributable to health care inflation but instead to demographics.
• The mandatory spending category of income security, now higher than normal because of the recession, would drop by over 60 percent over the budget window (from 2.1 percent of GDP to 1.3 percent).
• Interest payments under the Concord Plausible Baseline would more than double, growing from 1.4 percent of GDP this year to 3.6 percent in 2022, and would cost over $5 trillion during the 10-year period.
• If the caps included in the Budget Control Act are adhered to, CBO projects that discretionary spending would decrease from 8.3 percent of GDP in 2012 to 5.6 percent by 2022 — the lowest level in the last 50 years.

For more about our plausible baseline visit:

http://www.concordcoalition.org/concord-coalition-plausible-baseline

Image Courtesy of  Third Way

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The 21st century witnessed one of the most perilous and unethical alliances of mankind’s biggest foes: greed and capitalism. A system where the will or self interest emerges as a master of all human actions in the economic sphere.

There has been a change in the way organisations do businesses and there has been a change in the way businesses are being managed. With the passage of time, businesses have become more isolated from the basic idea of self-interest and more fascinated with profits, expanding their wealth based on what they see as most lucrative rather then on ethical foundations.

There is contamination of capitalism in every corner of the imagination, through the unscrupulous pursuit of profits, selfishness, and through an incorrect comprehension of the idea of economic freedom.

It is true that a farmer in the fertile English midland produces potatoes not to make consumers happy, but for his self-interest and survival. But it may also be true that if the farmer regularly exceeds his need, greed might lead to consumer concerns elsewhere, such as unjustified price movements or supply barriers.

Many illustrations, mathematically and not, can demonstrate how this system becomes contaminated. When capitalism was introduced it was hailed has a unique path to prosperity, opportunity, and more importantly, an end to inequality.

Over the years the urge to make money has killed morality. Now we are trapped in a net which was earlier believed to be a liberator from material discomfort. Greed became epidemic at all levels of commercial existence in the world.

We are living in a society where wealth commands, and those who posses wealth command the world — often in a way that only benefits themselves. The ideals of capitalism to provide opportunities that benefit everybody are contaminated by self interest, and this transition from self-interest to greed in recent years proved fatal. If the bottom line of business is profits, then it is cultivating greed and no benefit at all.

The outburst of protests across the world primarily addressed income inequality and unethical behaviour on part of entrepreneurs. Over the years, the divide between rich and poor deepened in the US, according to the Congressional budget office. Between 1979 and 2007 the incomes of the top 1% grew by a whoping 275% average, and during the same time 60% of the American middle class income grew by just 40%.

Economist and Noble Laureate Paul Krugman wrote in the New York Times that the ‘we’re the 99%’ slogan correctly defines the issue as “being the middle class versus the elite.” He also noted that the movement debunked the wrong notion that rising inequality is “mainly about the well-educated doing better than the less educated.” True enough, economic injustice is not just about education, but to fully comprehend the deep-rooted cause requires organizes and collective study.

Under an Islamic economic system we will not find any of these character-based problems or growing inequality. The Islamic economic system is primarily based on Islamic laws and principles, while capitalism is constructed upon morality. Ideally, if something is based on religion there is no danger of greed and malice, because no religion has ever preached greed. The Islamic economic system considers greed as a grave sin, so if the system tried to bring in something which is based on faith, people might refrain from evil deeds. But unfortunately Islamic economic system is hardly prevalent.

What we need is to find ways to resolve inefficiencies of the system through religious methodologies rather than criticism of capitalism.

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Generation Opportunity President Paul T. Conway, former Chief of Staff of the U.S. Department of Labor under Secretary Elaine L. Chao, responds to the January 2012 jobs numbers report released by the Bureau of Labor Statistics:

“Young Americans, including young veterans who have honorably served their nation, are being told by President Obama and his administration to settle for a new economic status quo where the lack of jobs, high unemployment, a record high number of people dropping out of the labor force, and limited economic opportunity are considered normal.

Instead of being allowed to pursue their dreams and careers through meaningful work, regular paychecks, and new skills gained on the job, the ongoing poor economy is forcing young adults to delay their plans, delay their lives, and scramble to simply make ends meet.

“Despite thirty-six consecutive monthly jobs reports with unemployment over eight percent and a new CBO forecast of higher unemployment in the year to come, the message from the Obama administration to young Americans is to expect more of the same — higher taxes, more regulations, and more federal interference targeted at private sector job creators.

Young adults pay dearly for this administration’s disregard and diminishment of private employers. Their level of aloofness and lack of empathy for the daily concerns of young Americans is as astounding as it is unacceptable.”

January’s 8.3 percent overall jobless rate fails to reflect the significant and ongoing challenges faced by young Americans in the continually poor economy. Joblessness among Millennials ages 18-29 is already at historic levels since the end of World War II, and hidden behind January’s numbers is the fact that many Americans have either accepted short-term, seasonal work or simply given up looking for work and are, therefore, not factored into the unemployment rate.

Even worse, the long-term U.S. job growth picture remains grim based on an official report released this week by the Congressional Budget Office (CBO). CBO’s January 31, 2012 report concluded “a large portion of the economic and human costs of the recession and slow recovery remains ahead.”

CBO is also forecasting that the U.S. unemployment rate could reach 8.9 percent by the end of 2012, and could potentially increase to 9.2 percent in the year 2013. Finally, the report forecasts that the unemployment rate could remain as high as seven percent through the end of 2015, and that economic activity may remain “below the economy’s potential until 2018.”

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With the failure of the Obama administration to extend its fiscal policy and redeem the American economical illness, people have now fervently placed their hopes in the lap of the Federal Reserve Bank. The American economy is currently going through a rough phase riddles with unfortunate events that has infused pessimism in the system.

Americans are believed to be as pessimistic about the U.S economy as they were during the Great Depression; this shows in key readings of the consumer confidence data. In august the consumer confidence index plunged to its lowest level since April 2009. Consumer confidence index is the degree of optimism consumers have about the overall state of the economy.

It generally indicates the financial situation of the people and their confidence about their future earnings. In a situation like this where rising unemployment and mild lob losses on a constant basis lowers the probability of stability in future income, consumers eventually lose buoyancy and start reducing their spendings.

The consumer confidence index, also sometimes referred to as the expectation index, that dropped 23 point from 74.9 to 51.9 in July. The month of August saw the steepest fall since the heydays of the early recession in 2007.

Jobs in crisis

The darkening outlook of US economy is due to the debt ceiling debates, falling employment, irregular stocks and the downgrade by S&P. With spending cuts and the gloomy jobs outlook, the chances of a sooner-than-expected recovery remains a distant dream.

In a top job-killing list, prepared by CNN Money, Goldman Sachs, the Wall Street giant, took second place; Goldman recently axed 1000 jobs as a part of their cost-cutting effort. Technology giant Cisco Systems also announced a cut of 6500 employees. Top defense supplier to pentagon, The Lockheed Martin said it has laid off 6500 employees and counting.

Research in Motion, maker of Blackberry, also slashed 2000 employees or nearly 10 percent of its workforce. Once the leader in North America Smartphone market, the company finds that sales are waning since Apple launched its new iPhone. With fiscal alternatives drying up there has been a diversion of attention towards the Federal Reserve (FED).

At the two-day FED annual forum at Jackson Hole, Wyoming, Bernanke did not give any hints about another round of economic stimulus, but said that the central bank would do all to help boost recovery. Jesse Cole, head of Merlin Institutional group, said “Bernanke really indicated that the central bank has a lot more tools and weapons at its disposal to stimulate the economy.”

Hopes are sky high since the FED chief used his Jackson Hole speech last year to lay the groundwork for a second round of bond purchases. Earlier in December 2008, the FED chief expanded the meeting for two days and lowered the benchmark interest rate to near zero from 1%

Roller-coaster ride

Recent budget outlooks from the Congressional Budget Office (CBO) provided further proof that the U.S. should be serious about dealing with debt. CBO wants to make about about striking a balance in the efforts to tamp down the debt burden and tanking economic growth.

Not surprisingly, Bernanke echoed a similar voice when he said policymaker should be more careful with current economic recovery and fiscal headwinds that may come up in time. The macro economic situation is difficult with the current high unemployment rates, the high gasoline prices,the  debt mountain, and shrinking alternatives.

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In an interesting turn of events, the Congressional Budget Office rating Senator Harry Reid (D-NV)’s debt ceiling plan. Just one day after the CBO scored Speaker John Boehner’s plan, the non partisan congressional scorekeeper released their findings on Reid’s plan.

On Tuesday, the CBO stated that the Speaker’s plan would save $850 billion over the course of 10 years. Reid’s plan would reduce the deficit by $2.2 trillion over the next decade, the nonpartisan Congressional Budget Office said. The Speaker was already forced to pull his bill over the low score from the CBO and stated that he was going to “rework” it. Reid’s plan also included no tax hikes or increases in revenue, a demand of the Republican Party.

Two major differences account for the conflicting scores. In Reid’s plan, the very expensive wars in Iraq and Afghanistan will completely end. Also, Boehner’s plan only raised the debt ceiling by one trillion dollars and was only trying to find a trillion cuts to match the amount of raising the debt ceiling. Under Reid’s plan, the debt ceiling would be raised until 2013.

Rep. Boehner defends his plan, calling the CBO results “misleading.” Boeher spokesman Michael Steele explained why the report was misleading.

This report shows the Senate plan for what it is: a grab-bag of gimmicks that gives the President a blank check. In contrast to the bill House Republicans have offered, the Senate Democratic bill counts as ‘savings’ a trillion dollars in war money that would never have been spent — and on top of that, slashes the defense budget in a manner that would hurt our men and women in uniform in a time of war.

It relies on smoke and mirrors for half of its ‘savings,’ yet still cuts $500 billion less than promised. In reality, the Reid plan would only save taxpayers about $1 trillion while giving the President the largest debt limit increase in history. Despite previous claims, it significantly falls short of the requirement that we cut more than we increase in the debt limit.

President Obama and other Democrat leaders are supporting Reid’s plan. Reid has hinted that Congress may be working on a compromise. “Magic things can happen here in Congress in a very short period of time under the right circumstances,” said Reid, the Senate majority leader.
Image Courtesy of  http://www.flickr.com/photos/americanprogressaction/

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The Congressional Budget Office, the non-partisan group that provides cost and data analysis for legislation, released its findings on House Speaker John Boehner’s debt plan. According to the CBO, the Budget Control Act of 2011 would save roughly $850 billion over the course of ten years and just $1 billion in 2012.The findings disappointed Speaker Boehner who said he rewrite the bill in order to save more money.

These savings will not satisfy Boehner’s conservative and tea party base. House Republicans have demanded immediate cuts, however under Boehner’s plan the cuts would not be felt for a few years.

“Americans deserve immediate spending cuts that demonstrate that we are charting a swift path toward a balanced budget. We must implement discretionary and mandatory spending reductions that would cut the deficit in half next year,” read a May 2011 letter from the conservative Republican Study Committee.

“Any move to raise the debt limit must be accompanied by immediate spending cuts and binding reforms so that we don’t continue to push our country down the road to bankruptcy,” House Majority Leader Eric Cantor (R-Va.) said in early May.

Boehner has also made similar statements. Early this month, he rejected a suggestion by Democrats that the majority of cuts be concentrated in future years. But, his new proposal does find the immediate cuts that Boehner himself demanded. Because programs already have budgets and operating costs, spending cuts that take effect immediately are nearly impossible to achieve. A simple fact that Boehner and others from the tea party seem to forget.

“We’re here to change Washington – no more smoke-and-mirrors, no more ‘phantom cuts.’ We promised that we will cut spending more than we increase the debt limit – with no tax hikes – and we will keep that promise,” Boehner spokesperson Michael Steel said in a statement after the CBO analysis was released.

“As we speak, Congressional staff are looking at options to re-write the legislation to meet our pledge. This is what can happen when you have an actual plan and submit it for independent review – which the Democrats who run Washington have refused to do.”

Image Courtesy of  http://www.flickr.com/photos/speakerboehner/

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